Table 6.7 Table 6.7 shows Antonio's utility from beer and pizza.
-Refer to Table 6.7.Suppose Antonio has $10 to spend and the price of beer = $2 per glass and the price of pizza = $2 per slice.How many of each good will he consume when he maximises his utility?
A)2 glasses of beer, 1 slice of pizza
B)2 glasses of beer, 3 slices of pizza
C)3 glasses of beer, 2 slices of pizza
D)4 glasses of beer, 5 slices of pizza

Question

Table 6.7  Table 6.7 shows Antonio's utility from beer and pizza.
-Refer to Table 6.7.Suppose Antonio has $10 to spend and the price of beer = $2 per glass and the price of pizza = $2 per slice.How many of each good will he consume when he maximises his utility?
A)2 glasses of beer, 1 slice of pizza 
B)2 glasses of beer, 3 slices of pizza 
C)3 glasses of beer, 2 slices of pizza 
D)4 glasses of beer, 5 slices of pizza

Quizplus · Accepted Answer

To maximize utility given the budget constraint, Antonio should choose the combination of goods that give him the highest total utility per dollar spent. From the table, we see that the marginal utility per dollar of the third glass of beer is 4 ($8/2) which is greater than the marginal utility per dollar of the second slice of pizza which is 3 ($6/2). Therefore, Antonio should consume 3 glasses of beer ($6) and 2 slices of pizza ($4) maximizing his budget and utility.

Table 67 Table 6